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Microsoft Sues IRS For Details Of Law Firm Contracted To Probe Transfer Pricing

Microsoft Corp. (MSFT) has sued the Internal Revenue Service over a review by the agency on the transfer price of goods being transferred between the software giant and its offshore subsidiaries, according to media reports on Monday. The company has filed a lawsuit in the U.S. District Court of the District of Columbia.

The IRS has been reviewing Microsoft's income tax return filings for the years 2004 to 2009. The IRS had retained law firm Quinn Emanuel Urquhart & Sullivan LLP to assist in the review. However, the firms profile says it specializes in business litigation and arbitration.

Microsoft has been seeking complete information from the IRS for nearly two months related to the reported $2.2 million contract signed in May between the IRS and Quinn Emanuel to conduct the review of Microsoft's books.

Microsoft has accused the IRS of unlawfully withholding the information and said it has not fulfilled a request under the Freedom of Information Act that sought the complete details on the Quinn Emanuel contract and other documents.

A Microsoft spokesperson said, "Government agencies, funded by citizens, have an obligation of transparency under the Freedom of Information Act. The IRS has failed to meet the deadline to respond to a valid FOIA request, and we're simply asking a Court to ensure that the IRS meets its obligations."

Microsoft revealed in a form 10-Q filing with the U.S. SEC on October 23rd that it has settled a portion of the IRS audit for tax years 2004 to 2006 during the third quarter of fiscal year 2011, but still remains under audit for those years. The company added that it also continues to be subject to examination by the I.R.S. for tax years 2007 to 2013.

The IRS has been reviewing the tax filings submitted by technology companies related to the transfer pricing and how it is accounted in the books. Last year, the IRS slapped Amazon (AMZN) with a bill for $234 million in unpaid taxes over similar procedures.

Multinational companies normally put a value for the goods and services that they move across international borders to its international subsidiaries. The IRS is checking if the companies are pricing the goods and services at a reasonable fair market rate as these mostly help in reducing the firms' global tax costs.

MSFT closed Wednesday's regular trading session at $47.59, down $0.39 or 0.81% on a volume of 35.43 million shares.

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